That said, the lender, while not new to lending to people and LLCs, hasn't done any lending to a 401k Trust before. Is there anything different he needs to do to lend to my 401k Trust, other than the non-recourse / no personal guarantee language in the loan documents?
I am assuming that since a Trust can buy / hold / sell property via a deed in it's name, that it can just as easily be lent money based on a property that it owns, via a non-recourse mortgage... in the same way that any other entity like an LLC or Corporation could have a mortgage. But I wanted to ask you if there are any additional nuances to creating a Deed of Trust for a 401k Trust owned property that he should take into account.
ANSWERS: Attached is a sample non-recourse note for your reference and review with your financial professionals.
The main difference between lending money to a 401k including a self-employed plan such as a solo 401k trust, is that the loan to the 401k must be on a non-recourse basis. Essentially, the lender cannot go after the solo 401k owner's personal assets or the balance of the solo 401k in the event the solo 401k defaults on the loan. In the event of default, the lender can only look to the real-estate property for repayment. To review the non-recourse loan rules, click here.
Josh in Ohio